Pakistan, which is a consumer of over 400,000 barrels
of oil per day, has to endeavour and in fact striving hard to get rid of
the huge burden of import bill on the national economy ranging $2.5- $3
billion every year.
The option for the economic manager is to improve the
available energy resources within the country or to find oil substitutes
that obviously can be natural gas or utilization of plentiful coal
reserves so far untapped in Pakistan.
Working on these lines, the government has already
indicated to shift power generating sector and other oil consuming
industries either on natural gas or on coal.
Out of the total expenses on the import of POL
products, only the fuel oil or the furnace oil adds over a
billion-dollar to the total oil import bill every year.
Steps however have been initiated to stop import of
fuel oil completely within a year or two by switching over the oil
consuming industrial units from oil to gas or coal. A major portion of
the cement units and power generation has already been shifted to
coal-fired and gas fired system respectively.
However, apart from hectic efforts so far made to
explore oil within the country, the total production of oil from local
resources has not touched even one forth of the total oil requirement.
With the new discovery of oil resources in Sindh, Pakistan's indigenous
crude production is approximately around 60,000 barrel per day out of
which some 5000 barrels are exported. Our total proved reserves are
estimated around 275 million barrels. The crude import requirement is
currently about 150,000 barrels a day. Although country is rich in
natural resources and has the capacity to become self-sufficient in
energy, however under the given circumstances it seems hard to predict
how long it would take to attain that position when our dependence on
imported energy is done away with.
It is unfortunate that the access to the oil
potential blocks especially in the province of Balochistan is a major
obstacle for the oil exploring companies due to large area in that
tribal area is under force majeure and the tribal chiefs are creating
obstacles in reaching the available opportunities. There were reports a
few months back that some understanding between the government and the
tribal chiefs had reached. This understanding followed by some
incentives to the provincial government as well for the development in
the province. However the agreement has not produced the desired results
so far. Recently, it is learnt that the federal government and the
provincial government of Balochistan have left aside the issue of
evacuating some of the oil and gas fields from the local tribes until
the general elections in the country. The exploration activities have
been reported stopped by the companies involved due to agitation from
the tribal people. There are a number of areas having ample scope for
exploration of natural resources especially oil and gas in Balochistan.
These areas are identified as Dera Bugti, Jandran area of Kohlu in Mari
Tribal Agency and Sarooria in District Khuzdar. Generally, the local
population opposes development activity in their areas with the
contention that process of development and arrival of outsiders may put
the local population in a state of minority. There are also some bad
feelings about the activity of foreign companies in that area it is
learnt they have expressed their willingness to tolerate the oil
exploration activities to be undertaken by Iranian or Chinese companies
but not the companies from the West.
The federal government on its part has however taken
effective initiatives especially for uplift of the underdeveloped areas
in that province. The government has earmarked Rs890 million for
initiating development work in Mari, Bugti and Mengal areas and also for
raising Special levy force. There is however need to convince to the
local people that development of their areas is in the best interest of
people of the area as well as of the nation and the generations to come.
Permission, being given to the private sector for launching radio
broadcasting station can be used effectively to educate the population
living in the remote parts of the country about the benefits of the
development which is the only source of social and economic prosperity
of the people and the area.
Despite the fact that the energy sector is the only
vibrant sector where the foreign investment is coming noticeably, yet it
does not translate the real potential of the natural resources, the
nature has gifted to this country. The present government has
accelerated the pace of reforms in the oil sector with the deregulation
of this important sector.
Pakistan has an extensive natural gas infrastructure,
however, the gas reserves are gradually declining especially in Sui and
need augmentation either through new findings or gas supply arrangements
Pakistan's petroleum minister Usman Aminuddin
recently visited Kabul to attend the second steering committee meeting
on Pakistan-Afghanistan-Turkmenistan gas pipeline. The international
donors who were earlier hesitant to provide financing for this cross
border pipeline project have now expressed willingness to sponsor this
significant project. The Asian Development Bank is also taking keen
interest in the project and has assured financing for feasibility report
of the project. Once this project comes on the ground, Pakistan is
likely to assume a noticeable position on world's natural gas map.
The process of deregulation initiated by the present
government has already eliminated the involvement of the government in
lubricants, import and pricing of various segments of the oil sector.
The intention of the government to deregulate the import of High Speed
Diesel (HSD) is yet another major step to bring in the private sector in
Farooq Rehmatullah, Managing Director of Shell
Pakistan on the occasion of Annual General Meeting held in Karachi has
observed that Oil Sector has great potential to attract foreign
investment in Pakistan, however, the lowest rate of margin is proving a
Accompanie by Salimuddin Ahmed, Director External
Affairs and Hussain Mucchhala, Director Finance, the Shell Chief said
that the margin of oil companies in Pakistan hardly comes to 3.5 per
cent which, can be stated as the lowest in the world. As compared to the
margin rate in Pakistan, the oil companies operating in other countries
like Malaysia, Singapore, Thailand and India was between 15 to 20 per
Reviewing the performance of Shell Pakistan during
the financial year ended June 30, 2002 Farooq Rehmatullah who is also
the Chairman of the Company said with a sense of achievement that Shell
has successfully met the challenges of a volatile economic environment
and reduced economic activity. Company's tenacity is reflected in the
improvement of gross sales, which increased by 5 per cent from last year
to a record Rs78.9 billion, largely owing to higher volumes, and price
Overall profit after tax increased by 1 per cent to
Rs1.06 billion. This performance encouraged the company to recommend a
final dividend of Rs14 per share which along with the interim dividend
of Rs4 per share declared earlier in February last makes for a total
distribution of Rs18 per share for the financial year 2002.
The Shell Petroleum Company Ltd (UK) also increased
its investment in Shell Pakistan by purchasing an additional 5.744
million shares at a cost of $22.3 million demonstrating Shell's
committed confidence in the countr's economic progress and in the
buoyancy of the oil and gas sector in Pakistan.
Responding to a relevant question that while the oil
companies are getting the lowest margin in this country, why the price
of POL products are so high in Pakistan? Rehmatullah while pointing out
towards the international oil prices responsible for increase of oil
prices in Pakistan also the government levies on the oil products are
responsible for making the oil as an expensive commodity in Pakistan.
The government levy on motor gasoline comes to 48 per
cent and on HSD it was 26-27 per cent which, has been recently reduced
to 23 per cent.
Farooq Rehmatullah answering to another question said
that the oil companies operating in Pakistan times and again have
invited the government attention towards the issue of higher oil prices
due to the levy on oil products and having suggested to bring down the
size of levies as well. In Pakistan government levy is a major source of
revenue causing increase in oil prices.
Farooq Rehmatullah said that an increase in margin of
oil companies would not only improve the status of Petroleum Industry
but will also greatly encourage the foreign investment at a massive
However, despite an extremely low margin, Shell has
invested $32 million in Pakistan. He said that the Company has also paid
$11.3 million out of its share for the White Oil Pipeline project from
Karachi to Mahmoodkot. This pipeline project is very vital for the
country as it will carry 5 million tons of petroleum hence attributing
to reduce the transportation expenses and minimizing the road occupancy
by the tankers and also improve the traffic hazards and accidents.
Farooq Rehmatullah expressed his concern that if the
US-Iraq conflict flares up, it could further raise the international
prices of POL products.
Shell is the leader in petroleum industry. It is
committed to work for the betterment of peoples standard in health,
education, social welfare and overall economy of the country.
Pakistan State Oil, which is the largest Oil Company
in the public sector, announced the highest-ever cash pay out of Rs1.86
billion to sharesholders for the financial year 2002. The company
approved a final dividend comprising 80 per cent, cash Rs8/ per share
and 20 per cent bonus shares combined with earlier two interim cash
dividends of Rs5 per share, the total amounts to Rs13 per share.
The impressive financial achievement of the company
ratifies the remarkable results hit by the company. According to a PSO
spokesman, despite the revenue drop and a record provision of Rs2
billion made for taxes (an increase of Rs800 million) PSO earned an all
time record profit before tax of Rs5.1 billion, up by 49 per cent, while
profit after tax rose to Rs3.2 billion registering a growth of 42 per
cent over prior year period. In addition, the company absorbed the
balance financial impact of Rs408 million on account of Voluntary
Separation Scheme (VSS) offered in April 2001. Even after excluding
adjustments and inventory gains/losses, operating profit of the company
grew by an impressive 32 per cent over the previous year.
The profit increase is primarily due to innovative
marketing strategies, organizational restructuring, and product mix,
revamping of internal systems with improved productivity along with the
partial impact of enhanced margins during the last quarter, the company
Caltex Oil (Pakistan) Limited, one of the most
outstanding oil companies operating in Pakistan carries professional
vision to carve an impressive place in the market. Taking advantage of
its professional vision, Caltex was the first amongst the oil majors to
establish Compressed Natural Gas (CNG) refueling facility at its retail
network. Caltex Chief Arshad Nasar says that the company took the lead
due to its commitment to the government's policy of promoting CNG as an
alternative fuel to the general public.
Caltex has already invested over $1.0 million in
setting up 25 refueling facilities at initial stage, with the setting up
of additional 25 facilities the number of fueling stations are about to
touch the figure of 50 stations. Besides refueling facilities, Caltex
has also set up 4 CNG conversion centers in view of the increasing
demand for CNG.
Caltex believes that Pakistan has a vibrant economy
with a significant size of 140 million populations. Far-sighting future
economic growth in Pakistan, Caltex has quite extensive investment plans
amounting to Rs4.5 billion since January 2000 in projects related to the
development and augmentation of petroleum infrastructure of national
importance. Recently, Caltex has purchased 11 per cent equity in the
White Oil Pipeline project which, is estimated to cost around $480
million. This is the single largest investment in the petroleum
downstream sector after the PARCO refinery project in Pakistan. The
pipeline project is to play a significant role in country's overall
economy by transporting HSD on the most economical, safe and reliable
basis from Port Qasim to Mehmoodkot, Multan.
Oil prices have multiplier effects on general price
index besides affecting the competitiveness of locally produced goods in
the export market. Prices of POL products are kept low in many countries
to check the price inflation.
In Pakistan, petroleum imports represent 41 per cent
of the country's primary energy supply, which consumed at least 30 per
cent of our total export earnings. In real terms the price we have to
pay for import of oil is roughly estimated $3 billion dollars.
The demand for energy consumption so far grew at an
average of 4.8 per cent in the last five years. In order to meet the
future energy demands we have no option but to find cheaper and
indigenous resources to save the candle of the economy currently burning
from both ends. Because it is the people who pay the price at the cost
of their economic prosperity. The situation demands to deal with all the
snags responsible for creating hurdles in the way of economic progress
with iron hand.
As a result of disturbed conditions, due to US-Iraq
conflict, the sustainable supply at normal price always remains under
threat. On one hand sustainable supply of oil remains vulnerable while
on the other hand the importing country has to pay more when ever the
prices shot up in the world market. This situation becomes more painful
for a country like Pakistan, which has enormous energy resources and
ample scope for discovering more resources within the country.
The present government has launched a massive poverty
alleviation programme with the assistance of international donor
agencies in the country. The exorbitant oil and electricity prices may
however prove counter productive to the efforts of the government for
poverty alleviation in Pakistan. For example the high electricity rates
are the real cause of over 40 per cent power theft in Pakistan. The
affordable price of natural gas is the best example at least in the
domestic consumption where no report of gas theft is reported from any
part of the country.
If the present government desires producing positive
results out of its plans for the poverty alleviation, people at the helm
of affairs should pay a serious thought on the importance of affordable
price level of essential items especially the electricity and the POL
products to give a breathing space to the people. It is not the plans or
strategy but it is the people behind the plans and strategy that matters
for making these plans a success.